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SEC Filings

10-Q
TERRAFORM GLOBAL, INC. filed this Form 10-Q on 11/08/2017
Entire Document
 

The types of market risks we are exposed to include interest rate risk, foreign currency risk, liquidity risk and credit risk. We do not use derivative financial instruments for speculative or trading purposes.
Interest Rate Risk
As of September 30, 2017, our corporate level debt consisted of the Senior Notes (fixed rate). The estimated fair value of our corporate level debt was approximately $846.6 million and the outstanding amount of our corporate level debt was $753.8 million. We estimate that a 100 bps, or 1.0%, increase or decrease in market interest rates for this debt would have decreased or increased the fair value of our long-term debt by $32.4 million.
As of September 30, 2017, our project level debt was at both fixed and variable rates. The estimated fair value of our project level debt was $361.4 million and the outstanding amount of our project level debt was $346.3 million. We have entered into interest rate derivatives to swap certain of our variable rate project level debt to a fixed rate. Although we intend to use hedging strategies to mitigate our exposure to interest rate fluctuations, we may not hedge all of our interest rate risk and, to the extent we enter into interest rate hedges, our hedges may not necessarily have the same duration as the associated indebtedness. Our exposure to interest rate fluctuations will depend on the amount of indebtedness that bears interest at variable rates, the time at which the interest rate is adjusted, the amount of the adjustment, our ability to prepay or refinance variable rate indebtedness when fixed rate debt matures and needs to be refinanced and hedging strategies we may use to reduce the impact of any increases in rates. We estimate that a hypothetical 100 bps, or 1.0%, increase or decrease in our variable interest rates pertaining to interest rate swaps would have decreased or increased the fair value of the swaps respectively by $12.1 million and $13.1 million for the three months ended September 30, 2017.
Foreign Currency Risk
During the nine months ended September 30, 2017 and the year ended December 31, 2016, all of our revenues were generated outside of the United States in Brazilian real, Chinese yuan renminbi, Indian rupee, Malaysian ringgit, South African rand, Thai baht, and U.S. dollars, and were translated into the U.S. dollar, which is our reporting currency. The PPAs, O&M agreements, financing agreements and other contractual arrangements in our current portfolio are denominated in Brazilian real, Chinese yuan renminbi, Indian rupee, Malaysian ringgit, South African rand, Thai baht, U.S. dollars and Uruguayan pesos.
We use currency forward contracts in certain instances to mitigate the financial market risks of fluctuations in foreign currency exchange rates. We manage our foreign currency exposures through the use of these currency forward contracts to reduce risks arising from the change in fair value of certain assets and liabilities denominated in foreign currencies. The objective of these practices is to minimize the impact of foreign currency fluctuations on our operating results. We estimate that a hypothetical 100 bps, or 1.0%, increase and decrease in foreign currency exchange rates against the U.S. dollar would have the following impacts on our earnings for the nine months ended September 30, 2017:
(In thousands)
-100 BPS
 
+100 BPS
Brazilian real
(419)
 
411
Chinese yuan renminbi
(148)
 
145
Indian rupee
(326)
 
320
Malaysian ringgit
(22)
 
29
South African rand
(148)
 
146
Thai baht
(50)
 
49
   Total impact
(1,113)
 
1,099
Liquidity Risk
The Company’s principal liquidity requirements are to finance current operations, service debt and, if and when declared by the Company, to fund cash dividends to investors. Changes in operating plans, lower than anticipated electricity sales, increased expenses, acquisitions or other events may cause management to seek additional debt or equity financing in future periods. There can be no guarantee that financing will be available on acceptable terms or at all. Debt financing, if available, could impose additional cash payment obligations and additional covenants and operating restrictions. The Company’s ability to meet its debt service obligations and other capital requirements, including capital expenditures, as well as make acquisitions, will also depend on the Company’s future operating performance which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond management’s control.

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